Overview
- Hong Kong has been chosen by many international licensors and licensing agents as the strategic base to expand their licensing business in Asia, particularly the Chinese mainland.
- Hong Kong offers clear advantages as an ideal platform for licensors, licensees, agents and manufacturers to get together, which include intellectual property (IP) rights protection, respect for business agreements, distribution networks, access to quality licensees, availability of industry talent, market sensitivity and close business connections with the mainland.
- The annual Hong Kong International Licensing Show (HKLS) held since 2004 has been widely recognized as the best licensing show in Asia and has helped Hong Kong consolidate its position as the regional licensing hub. In January 2012, HKLS attracted nearly 16,000 trade visitors (from 110 regions and countries) including manufacturers, licensees, retailers and distributors, with over 500 brands & properties shown by 173 exhibitors from 16 regions and countries.
- China is the world’s fastest growing market for licensed goods, which has grown over 25% from US$1.1 billion in 2005 to US$ 3.9 billion in 2010. In 2010 alone, licensed merchandise sales in China grew by 25%. The per capita retail sales of licensed products of China rose by over seven-fold from US$0.4 in 2001 to over US$2.8 in 2010. In comparison, the U.S. and Canada experienced a decline of 4% in retail sales of licensed goods in 2010.
- In January 2010, the International Licensing Industry Merchandisers’ Association (LIMA) opened its 6th office in Hong Kong. The Hong Kong office is the regional hub to promoting licensing business and broadening business network for LIMA members in Southeast Asia’s licensing markets. The establishment of LIMA’s Hong Kong office is expected to reinforce the position of Hong Kong as a regional licensing trading centre.
- Both public and private sectors have devoted huge effort to promote Hong Kong as an international licensing hub in 2011. During the same year, Ocean Tomo, the world’s leading financial institution in providing professional services relating to IP, said Hong Kong has the potential to become Asia’s IP trading hub.
Market Characteristics
Hong Kong’s licensing market began to take shape in the early 1990s. Despite a relatively short history of development, Hong Kong has grown into a highly developed licensing market in Asia. Similar to the global and regional pattern, characters/entertainment properties from the US and Japan are the most popular properties in Hong Kong.
Hong Kong consumers are very sensitive to the latest market trends and licensed products generally appeal to young consumers. Main categories of licensed products are food and beverages, toys, books, gift items, stationery, computer supplies and sales promotions for fast food chains and banks.
Services Providers
Hong Kong has relatively few home-grown brands and properties for licensing. Nevertheless, many international licensors, like Warner Bros., Mattel and the National Basketball Association (NBA) have offices in Hong Kong. Many of them are the regional headquarters of those international licensors. Moreover, many famous foreign licensors have entrusted the exclusive rights to Hong Kong licensing agents to develop the business in Asia. Many licensing industry participants are members of the Licensing Executive Society of China, Hong Kong Chapter.
Exports
The significance of Hong Kong’s licensing business lies in its status as a hub for licensing activities in Asia. Local business usually accounts for a small proportion of overall business of licensors and licensing agents, who are most active in other Asian countries.
|
|
2008
|
2009
|
2010
|
|
Royalties and licence fees (US$ mn)
|
379
|
381
|
399
|
|
Growth (%)
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+5.9
|
+0.5
|
+4.6
|
|
Contribution to total services exports (%)
|
0.4
|
0.4
|
0.4
|
Source: Report on Hong Kong Trade in Services Statistics for 2010, Census & Statistics Department
Industry Development and Market Outlook
- The global retails sales of licensed goods amounted to US$146.5 billion in 2010. More than 60% of the sales were in the US and Canada, with 22% and 12% in Europe and Asia respectively. With a market size of US$3.9 billion, China was the second largest licensing business market in Asia, accounting for over 20% of the Asian market, following Japan.
- Licensing has become a global business in recent years. According to LIMA, about one-third of total revenue of global licensed products is now generated outside the US, compared with only 10% ten years before. Meanwhile, China and Southeast Asia are spotlights for licensing companies looking for new businesses.
- China is now the world’s fastest growing market for licensed goods, which has grown over 250% from US$1.1 billion in 2005 to US$ 3.9 billion in 2010. The per capita retail sales of licensed products of China rose by over seven-fold from US$0.4 in 2001 to over US$2.8 in 2010. In comparison, the U.S. and Canada has a decline of 4% in retail sales of licensed goods in 2010. Moreover, Thailand and Malaysia are considered high potential markets, especially in the toys and apparel sectors.
- As major films are released in various markets simultaneously to maximize global buzz, international co-productions are becoming more and more popular and contributing to a rise of cross-border entertainment properties in the global licensing market.
- The Internet is affecting the international licensing business. Characters, fads, brands and fashion trends now travel at hyper-speed across the markets, cutting short the time it takes to get a product from licensed concept to retail shelves.
- Non-traditional media (The Internet and Mobile) play an increasingly important role for promoting new properties.
- Ocean Tomo, the world’s leading financial institution in providing professional IP related services, said Hong Kong has the potential to become Asia’s IP trading hub in November 2011.
- Both public and private sectors have been working hard to promote Hong Kong as an international licensing hub in 2011. For instance, the Hong Kong government signed the first IP co-operation agreement with the Mainland government in November 2011, strengthening the co-operation in areas of laws, education and staff training. The Hong Kong Trade Development Council and the Hong Kong Design Centre co-organised the first Business of IP Asia Forum in December 2011, which was attended by more than 700 professionals and business leaders from 19 regions and countries. The discussions included the latest opportunities in global licensing.
- On the other hand, Asian Licensing Association was established by Hong Kong industry leaders in 2011, aiming to promote Hong Kong as an international licensing hub. The Innovative Entrepreneur Association organised the first Cross Industry Matching Showcase in the same year, which aimed to provide a platform for business synergy between local licensors (e.g. character creators and graphic designers) and enterprises.
China as the rising star
While the global licensing market has generally been stagnant, licensing activities are growing in Asia (outside Japan) -- the focus of development is the China market.
China is the world’s fastest growing market for licensed goods, which has grown over 250% from US$1.1 billion in 2005 to US$ 3.9 billion in 2010, i.e. an average annual growth rate of 29%, almost tripling the country’s GDP growth rate. Despite a very short history of development, the huge size of the economy has made China the second largest licensing market in Asia, following Japan.
Hong Kong-based licensing companies are major players on the Mainland, setting up offices in cities like Shanghai and Guangzhou with distinct functions. With strong networks on the Chinese mainland and in Southeast Asia, Hong Kong licensing agents are considered by many foreign licensors, the most preferred partners to tap these emerging opportunities.
On the other hand, Hong Kong is the best gateway for mainland-based enterprises to promote their brand names and trademarks overseas due to Hong Kong’s remarkable international network, as well as resourceful licensing players providing quality licensing services, including public relations support and personnel training. The increasing demand of licensing services from mainland-based companies is expected to drive the Hong Kong licensing industry to a higher level. Recent examples are the booming animation and film industries on the mainland, with a rising number of new original works.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
Among other provisions, CEPA further opens up the mainland market for Hong Kong products and the distribution business to Hong Kong companies. Since effective distribution is vital to the success of a licensing deal, Hong Kong companies making use of the opportunities provided by CEPA to develop their mainland business will likely be sought after as distributors for foreign licensors, who prefer to work with distributors that offer adequate IPR protection and services in line with international practices.
Hong Kong manufacturers on the mainland who build their own distribution channels on the mainland or partner with a reliable Hong Kong-invested distributor can become even stronger candidates as licensees for popular foreign properties.
Hong Kong manufacturers/licensees can also benefit from CEPA, given that all Hong Kong-produced goods fulfilling the required origin rules – many of which are hot products for licensing – can now enter the mainland market free of tariff.
